UNCTAD raises India's 2023 economic growth forecast to 6.6pc, but says Global economy a mixed bag

The Trade and Development Report 2023, released by UN Conference on Trade and Development (UNCTAD), warns that the global economy is stalling, with growth slowing in most regions compared with last year and only a few countries bucking the trend. It says the global economy is at a crossroads, where divergent growth paths, widening inequalities, growing market concentration and mounting debt burdens cast shadows on the future.

The prospect of meeting the Sustainable Development Goals (SDGs) by 2030 is fading as a combination of rising interest rates, weakening currencies and slowing export growth squeezes the fiscal space needed for governments to fight climate change and provide for their people. The report calls for a change in policy direction – including by leading central banks – and accompanying institutional reforms promised during the COVID-19 crisis to avert a lost decade.

It urges global financial reforms, more pragmatic policies to tackle inflation, inequality and sovereign debt distress, and stronger oversight of key markets. The report proposes actions to get the global economy moving in the right direction by using a balanced policy mix of fiscal, monetary and supply-side measures to achieve financial stability, boost productive investment and create better jobs.

At the same time, UNCTAD has upped India's 2023 economic growth forecast to 6.6%, from 6% predicted in April, though it expects the country's growth to slow to 6.2% in 2024. In its latest trade and development report, the UNCTAD said it expects growth of the world economic output to decelerate to 2.4% in 2023 but register a small uptick to 2.5% in 2024. The report comes a day after the World Bank projected India's economy to grow 6.3% in FY24. India's FY23 economic growth was 7.2%.

The multilateral body called for a change in policy direction, including by leading central banks, and accompanying institutional reforms promised during the Covid-19 cIREAD to avert a lost decade. "The global economy is flying at 'stall speed', with projected growth in 2023 of 2.4%, meeting the conventional criteria for a global recession. The entire global economy, except East and Central Asia, has slowed since 2022," UNCTAD said.

Highlighting that globally, the post-pandemic recovery is divergent, it said: "While some economies, including Brazil, China, India, Japan, Mexico, Russia and the United States, have demonstrated resilience in 2023, others face more formidable challenges". In India, the external sector-alongside the private and government sector-has contributed to domestic growth, partly helped by many countries redirecting trade flows away from the Russian Federation, with which India maintains a direct relationship, the Geneva-based organisation said.

While growth in 2022 moved back in line with pre-pandemic rates, it is expected to continue into next year, according to the report. "However, other indicators still suggest caution: with rates of unemployment still standing at 8.5% in June 2023, employment remains disappointingly low by historical standards. Inequality has also significantly increased - as suggested by data on real wages and the labour share-which could hinder growth," UNCTAD said.

It highlighted that India's 10 largest firm account for 8% of its total exports, althoug the total number of exporting firms exceeded 123,000 in 2021.